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Predictions for procurement in 2022

Part of our job as a service provider is to think about the future of procurement, so that we build solutions to problems organisations don't know they have yet. I want to share with you one major change we predict will occur over the next 10 years.

To predict the future, I've been thinking about what the origins of procurement are. Why has the procurement function come about?

And it strikes me that procurement exists because of corporate ignorance. 30 years ago, businesses didn't know what they were spending, with which suppliers, from which parts of the business. They had no understanding of whether they were achieving value for money. There was no technology involved. There was no strategic sourcing process utilised. Indeed there was little in the way of theoretical understanding of the principles of procurement as we know it today. As long as the product or service arrived on time, the business, from a corporate perspective, didn't care about the rest.

But then businesses started to care. And that is what created the Procurement function. It was a response to this ignorance, this lack of understanding. And what has resulted is a function whose actions have been defined by what needs to be done to resolve this ignorance. This has created the situation where too much time is spent on following a standard sourcing process. This is where much of the energies of today's procurement function is focused. The default approach too frequently is to run a tender - and people mistakenly think that this will achieve the best result. When I talk to CPOs one thing they all agree on is that a large percentage of the their people's time is spent on tasks that they are over qualified for, but which much be done to execute procurement well.

So imagine a future where technology and processes have resolved this ignorance. Where full visibility has been achieved. Where your procurement professionals are armed with the right knowledge and IP they need, right at the start of the sourcing process. Where value for money has been assured on the deals that have been done. Where the business has full knowledge of not only what is going on internally within the organisation in real time, but also what is going on in the market. (And by the way, I believe this is achievable, and we are building our business to achieve it). Then this future state has very dramatic implications for the skills and competencies of tomorrows procurement professional.

The procurement professional in 2022 will therefore be spending the majority of their energy on business relationship management (i.e. on servicing the stakeholders needs), on the strategic development of cost management, on developing and delivering long term plans, on influencing the behaviours of people within the business, and on change management. In my opinion, that future can't come too soon. And we should be preparing ourselves and training our professionals today to get ready for this.

What are your procurement predictions for 2022?

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Chris Patfield

Looking backwards first - category management made a big impact in how companies started to manage their expenditure and set strategies. So going forward for me I think more cost driver analysis/specialism through contract management and discovering alternative supply solutions as commodities/resources become scarce/more expensive.

James Williams

I would say more and more focus on relationship management as Procurement becomes the key focus to the majority of companies who will be struggling to survive in the harder economic times.

It could be argued that the origins of the procurement profession as we know it today lie in the wider, long term business trend towards core competencies.

In bygone times, where the norm was for virtually all work to be performed in-house, competition between businesses was essentially a matter of internal control: the organisations that were best at managing internal resources enjoyed lower costs, better quality, greater flexibility and innovation, etc, and so had competitive advantage in the marketplace.

In a world where organisations routinely outsource key operations, from manufacturing to HR services, and routinely buy in critical expertise, whether that’s technological IP, marketing creativity or strategic business consultancy, being good at managing internal resources isn’t enough. Competitive advantage lies in being able to build and manage a complex network of external providers. As organisations buy in more and more capability, they have had to become more adept at managing relations with external providers, at extracting maximum value from those relationships, managing the risks involved and handling the transactional complexity: all of that requires professional procurement.

The information point is right. Even maintaining visibility of the best suppliers to work with becomes more complex as the scope of what is bought expands (and as the world becomes more globalised). Knowing what is being bought, by whom and from whom, how relationships are performing, and how much it is all costing, will overwhelm any organisations that have not put effective technology and process in place.

A 2022 prediction? The evolution from transactional buying to functional purchasing to professional procurement will step up again to a new level: it will become about external asset strategy, design and management. i.e. a key competitive capability linking together business strategy, make or buy decisions, value chain management and executional effectiveness.

Seb Robin

Hi Tom, Difficult to argue against your prediction. Every other function of the enterprise is developing such partnership with their suppliers in order to keep a certain degree of control over an increasingly outsourced range of tasks. However, it seems to me that Procurement in general are finding it hard to settle in their role. Ultimately, as you say it, procurement professionals spend most of their time managing tender processes for a decision that ultimately remains with the business unit to which the good or service is destined. My question is : will we have to wait 2022 to see a change ? If the will to change the procurement function exists, why 20 years ? Surely where there's a will, there's action. Something tells me that there's no will to meet the aspirations.

My view is that the change needs to come from the board room. If the CFO needs visibility to show the result on the P&L;, it's either for the Procurement team to deliver it, or for the Finance dept. to gather the data from the different business units. Data centralisation appears to be a lot more sensible; hence the need to allow procurement to define the needs, manage the tender process and make the decision with global vision. Of course this process means working with the different units, and needs specification should be part of what is required from suppliers. But then, the procurement dept should be centralising the data and report to the CFO.

If this is the best way to handle procurement, then 20 years seem a long time to do the right thing. Surely Board Rooms can impose this as a policy far sooner.